E110 Review Questions for Chapter 6

Principles of Economics	Economics 110
Mr. Beck	SUNY College at Oneonta

Review Questions for Chapter 6

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Review Questions for Economics 110

Major Topics Covered in Chapter 6

Calculation of Price Elasticity of Demand: #Q4 #Q25 #Q31 #Q42 #Q44 #Q53 #Q57 #Q59 #Q60

Elasticity and Total Revenue (General): #Q1 #Q2 #Q3 #Q5 #Q6 #Q7 #Q8 #Q10 #Q11 #Q13 #Q15 #Q18 #Q22 #Q23 #Q26 #Q27 #Q28 #Q32 #Q33

#Q38 #Q39 #Q43 #Q45 #Q47 #Q54 #Q56 #Q58 #Q61 #Q63 #Q66

Elasticity and Total Revenue (Numerical): #Q9 #Q12 #Q14 Q16 #Q24 #Q29 #Q30 #Q34 #Q35 #Q37

#Q40 #Q41 #Q48 #Q52 #Q64 #Q65

Price Elasticity of Demand Characteristics: #Q17 #Q19 #Q20 #Q21 #Q36 #Q46 #Q55 #Q62

1. If consumers spend more money per day on good X after the price of good X is increased by 20%, then (within this price range) it is reasonable to assume that the

demand curve for good x is positively sloped.
percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price and thus demand is elastic.
percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price and thus demand is inelastic.
percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price and thus demand is elastic.
percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price and thus demand is inelastic.

Q1 answer

2. Good X is a necessity and there are no close substitutes available for it. If the price of good X were increased by 25%, then the producers of good X can expect that

quantity demanded would decrease by more than 25% because demand is elastic.
quantity demanded would decrease by more than 25% because demand is inelastic.
quantity demanded would decrease by less than 25% because demand is elastic.
quantity demanded would decrease by less than 25% because demand is inelastic.
quantity demanded would increase by less than 25% because demand is inelastic.

Q2 answer

3. Assume the demand for good X is inelastic. The price is changed and, as a result, total revenue (TR) decreases. It can be concluded that the price was

increased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price.
increased and the percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price.
decreased and the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
decreased and the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
decreased and the percentage (%) decrease in quantity demanded is less than the percentage (%) decrease in price.

Q3 answer

4. The absolute value of the price elasticity of demand between the 2 points, A and B on a demand curve is (rounding off to 2 decimal places, if necessary)

Point	Price	Quantity
A	$12	10
B	$ 4	16

Q4 answer

5. If a firm increases the price of its product by 8% and discovers that its total revenue (TR) increases as a result, then it can conclude that

quantity demanded decreased by less than 8% and thus demand is elastic.
quantity demanded decreased by more than 8% and thus demand is elastic.
quantity demanded increased by less than 8% and thus demand is inelastic.
quantity demanded decreased by less than 8% and thus demand is inelastic.
quantity demanded decreased by more than 8% and thus demand is inelastic.
quantity demanded increased by more than 8% and thus demand is elastic.

Q5 answer

6. Assume the price elasticity of demand is less than 1. If price is decreased by 2%, then

total revenue (TR) will increase because the increase in quantity demanded will be less than 2%.
total revenue (TR) will decrease because the increase in quantity demanded will be greater than 2%.
total revenue (TR) will increase because the increase in quantity demanded will be greater than 2%.
total revenue (TR) will decrease because the increase in quantity demanded will be less than 2%.
total revenue (TR) will decrease because quantity demanded will decrease by less than 2%.

Q6 answer

7. If only one gasoline station in a large city, acting alone, increased its price by 25%, it would be reasonable to expect that its

total revenue (TR) would decrease because demand would be inelastic.
total revenue (TR) would decrease because demand would be elastic.
total revenue (TR) would increase because demand would be inelastic.
total revenue (TR) would increase because demand would be elastic.
total revenue (TR) would remain constant because demand would be of unitary elasticity.

Q7 answer

8. When a firm increases the price of its product by 10%, the quantity demanded decreases by 4%. As a result of the price increase,

total revenue (TR) increases because demand is inelastic.
total revenue (TR) decreases because demand is elastic.
total revenue (TR) decreases because demand is inelastic.
total revenue (TR) increases because demand is elastic.

Q8 answer

9. A firm decreases its price from $10 per unit to $6 per unit. As a result, its total revenue (TR) increases from $80 to $96. The absolute value of the price elasticity of demand is (rounding off to 2 decimal places, if necessary)

Q9 answer

10. Recent studies have confirmed that the demand for electricity is inelastic. As the price of electricity increases,

total dollars spent by consumers on electricity will increase because the percentage increase in quantity demanded will be greater than the percentage increase in price.
total dollars spent by consumers on electricity will increase because the percentage increase in quantity demanded will be less than the percentage increase in price.
total dollars spent by consumers on electricity will decrease because the percentage decrease in quantity demanded will be greater than the percentage increase in price.
total dollars spent by consumers on electricity will decrease because the percentage decrease in quantity demanded will be less than the percentage increase in price.
total dollars spent by consumers on electricity will increase because the percentage decrease in quantity demanded will be less than the percentage increase in price.
total dollars spent by consumers on electricity will increase because the percentage decrease in quantity demanded will be greater than the percentage increase in price.

Q10 answer

11. Assume the demand for good X is elastic. If a firm were to decrease the price of good X, then

total revenue (TR) would increase because the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
total revenue (TR) would increase because the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
total revenue (TR) would decrease because the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
total revenue (TR) would decrease because the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
total revenue (TR) would decrease because the percentage (%) decrease in quantity demanded is greater than the percentage (%) decrease in price.
total revenue (TR) would decrease because the percentage (%) decrease in quantity demanded is less than the percentage (%) decrease in price.

Q11 answer

12. The absolute value of the price elasticity of demand between the 2 points, A and B, on a demand curve is (You should round off your answer to the nearest hundredth [2 decimal places], if necessary.)

Point	Price	Quantity
A	$ 30	21
B	$ 10	29

Q12 answer

13. If consumers spend less money per day on good X after the price of good X is decreased, then it can be concluded that

the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price. Demand is elastic.
the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price. Demand is inelastic.
the percentage (%) decrease in quantity demanded is greater than the percentage (%) decrease in price. Demand is elastic.
the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price. Demand is inelastic.
the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price. Demand is elastic.
the percentage (%) decrease in quantity demanded is less than the percentage (%) decrease in price. Demand is inelastic.

Q13 answer

14. A firm is selling 20 units of quantity per day. It estimates that to increase its quantity sold to 30 units per day, it would have to cut its price in half. What is the absolute value of the price elasticity of demand between 20 and 30 units of quantity (rounded off to the nearest hundredth [2 decimal places], if necessary)?

0.60
0.75
0.80
1.00
Insufficient information provided to calculate the price elasticity of demand between 20 and 30 units of quantity.
Sufficient information provided, but none of the numerical answers provided is correct.

Q14 answer

15. When a firm increases the price of its product by 10%, the quantity demanded decreases by 30%. As a result of the price increase,

total revenue (TR) increases because demand is inelastic.
total revenue (TR) decreases because demand is elastic.
total revenue (TR) decreases because demand is inelastic.
total revenue (TR) increases because demand is elastic.

Q15 answer

16. A firm decreases its price from $15 per unit to $5 per unit. As a result, its total revenue (TR) increases from $90 to $100. The absolute value of the price elasticity of demand is (rounding off to 2 decimal places, if necessary)

Q16 answer

17. Which of the following characteristics will tend to make the demand for good X most inelastic?

Good X represents a small share of most consumers’ budgets and there are many close substitutes available for it.
Good X represents a small share of most consumers’ budgets and there are no close substitutes available for it.
Good X represents a large share of most consumers’ budgets and there are many close substitutes available for it.
Good X represents a large share of most consumers’ budgets and there are no close substitutes available for it.

Q17 answer

18. The price of good X is cut in half. As a result, quantity demanded exactly doubles. It can be concluded that

price elasticity of demand is greater than 1 and total revenue (TR) increases.
price elasticity of demand is greater than 1 and total revenue (TR) remains unchanged.
price elasticity of demand is equal to 1 and total revenue (TR) increases.
price elasticity of demand is equal to 1 and total revenue (TR) remains unchanged.
price elasticity of demand is less than 1 and total revenue (TR) decreases.
price elasticity of demand is less than 1 and total revenue (TR) remains unchanged.

Q18 answer

19. The price of electricity is controlled by the government because

the demand for electricity is elastic and increasing its price would increase total revenues (TR).
the demand for electricity is elastic and increasing its price would decrease total revenues (TR).
the demand for electricity is of unitary elasticity and increasing its price would increase total revenues (TR).
the demand for electricity is inelastic and increasing its price would increase total revenues (TR).
the demand for electricity is inelastic and increasing its price would decrease total revenues (TR).

Q19 answer

20. Which one of the following combinations of characteristics would tend to make the demand for good X very inelastic?

Good X is a necessity and there are no close substitutes for good X.
Good X is a necessity and there many close substitutes are for good X.
Good X is a luxury good and there are no close substitutes for good X.
Good X is a luxury good and there are many close substitutes for good X.

Q20 answer

21. Good X is an expensive item for which there are many close substitutes. If the price of good X were increased by 50%, then the producers of good X can expect that

quantity demanded would decrease by more than 50% because demand is elastic.
quantity demanded would decrease by more than 50% because demand is inelastic.
quantity demanded would decrease by less than 50% because demand is elastic.
quantity demanded would decrease by less than 50% because demand is inelastic.
quantity demanded would increase by less than 50% because demand is inelastic.
quantity demanded would increase by more than 50% because demand is elastic.

Q21 answer

22. Assume the demand for good X is elastic. The price is changed and, as a result, total revenue (TR) decreases. It can be concluded that the price was

increased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price.
increased and the percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price.
decreased and the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
decreased and the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
decreased and the percentage (%) decrease in quantity demanded is less than the percentage (%) decrease in price.
increased and the percentage (%) increase in quantity demanded is greater than the percentage (%) increase in price.

Q22 answer

23. If a firm increases the price of its product by 10% and discovers its total revenue (TR) increases as a result, then it can conclude that (within this price range)

quantity demanded decreased by less than 10% and thus demand is elastic.
quantity demanded decreased by more than 10% and thus demand is elastic.
quantity demanded decreased by less than 10% and thus demand is inelastic.
quantity demanded decreased by more than 10% and thus demand is inelastic.
quantity demanded increased by less than 10% and thus demand is inelastic.
quantity demanded increased by more than 10% and thus demand is elastic.

Q23 answer

24. A firm estimates that the price elasticity of demand for its product is unitary (equal to 1). It is currently selling 45 units of quantity per day at a price of $100 per unit. To what $ amount would it have to decrease its price to be able to sell 60 units of quantity per day?

Q24 answer

25. The absolute value of the price elasticity of demand between the 2 points, A and B on a demand curve is (using the midpoints formula and rounding off to 2 decimal places, if necessary)

Point	Price	Quantity
A	$35	7
B	$5	13

Q25 answer

26. Assume the price elasticity of demand is greater than 1. If price is increased by 10%, then

total revenue (TR) will increase because the decrease in quantity demanded will be less than 10%.
total revenue (TR) will decrease because the decrease in quantity demanded will be greater than 10%.
total revenue (TR) will increase because the decrease in quantity demanded will be greater than 10%.
total revenue (TR) will decrease because the decrease in quantity demanded will be less than 10%.
total revenue (TR) will increase because quantity demanded will increase by more than 10%.
total revenue (TR) will increase because quantity demanded will increase by less than 10%.

Q26 answer

27. A firm decreases the price of its product by 30% and notices that as a result quantity demanded increases by 20%. It can be concluded that

total revenue (TR) will increase and demand is inelastic.
total revenue (TR) will increase and demand is elastic.
total revenue (TR) will decrease and demand is inelastic.
total revenue (TR) will decrease and demand is elastic.

Q27 answer

28. If the price of good X were decreased by 5% and demand is inelastic, it can be concluded that

total revenue (TR) will increase because the increase in quantity demanded will be less than 5%.
total revenue (TR) will increase because the increase in quantity demanded will be greater than 5%.
total revenue (TR) will decrease because the increase in quantity demanded will be less than 5%.
total revenue (TR) will decrease because the increase in quantity demanded will be greater than 5%.
total revenue (TR) will decrease because the decrease in quantity demanded will be less than 5%.
total revenue (TR) will decrease because the decrease in quantity demanded will be greater than 5%.

Q28 answer

29. The price of good X goes down from $5 to $3. As a result, the total revenue received (TR) by the producers of good X increases from $30 to $42. What is the absolute value of the price elasticity of demand for good X between $5 and $3 (using the midpoints formula and rounding off to the nearest hundredth, if necessary)?

Q29 answer

30. A firm can sell 100 units of quantity per day at a price of $10/unit. If it decreased its price to $7/unit it would be able to sell 140 units of quantity per day. By decreasing its price from $10 to $7, the firm realizes that, within this price range,

total revenue (TR) would increase and demand is elastic.
total revenue (TR) would decrease and demand is elastic.
total revenue (TR) would stay constant and demand is of unitary elasticity.
total revenue (TR) would increase and demand is inelastic.
total revenue (TR) would decrease and demand is inelastic.

Q30 answer

31. The absolute value of the price elasticity of demand between the 2 points, A and B on a demand curve is (using the midpoints formula and rounding off to 2 decimal places, if necessary:

Point	Price	Quantity
A	$300	6
B	$ 100	10

Q31 answer

32. A firm raises the price of its product by 10% and notices that as a result quantity demanded decreases by 3%. It can be concluded that

total revenue (TR) will increase and demand is elastic.
total revenue (TR) will increase and demand is inelastic.
total revenue (TR) will decrease and demand is elastic.
total revenue (TR) will decrease and demand is inelastic.

Q32 answer

33. If the price of good X were cut by 50% and demand is elastic, it can be concluded that

total revenue (TR) will increase because the increase in quantity demanded will be greater than 50%.
total revenue (TR) will increase because the increase in quantity demanded will be less than 50%.
total revenue (TR) will decrease because quantity demanded will decrease by more than 50%.
total revenue (TR) will decrease because the increase in quantity demanded will be greater than 50%.
total revenue (TR) will decrease because the increase in quantity demanded will be less than 50%.

Q33 answer

34. A firm can sell 100 units per day at $10/unit. It then cuts its price in half to $5/unit and its sales double to 200 units per day. The firm calculates that, within this price range,

total revenue (TR) would increase and demand is elastic.
total revenue (TR) would decrease and demand is elastic.
total revenue (TR) would stay constant and demand is elastic.
total revenue (TR) would increase and demand is inelastic.
total revenue (TR) would stay constant and demand is of unitary elasticity (elasticity = 1).
total revenue (TR) would decrease and demand is of unitary elasticity (elasticity = 1).

Q34 answer

35. A firm decreases its price from $5 per unit to $3 per unit. As a result, its total revenue (TR) decreases from $60 to $54. Using the midpoints formula, the absolute value of the price elasticity of demand is [rounded off to the nearest hundredth (2 decimal places) if necessary]

Q35 answer

36. Heating oil is a necessity with no close substitutes. As a result, if the price of heating oil is increased,

demand is elastic and total revenue (TR) will increase.
demand is inelastic and total revenue (TR) will increase.
demand is elastic and total revenue (TR) will decrease.
demand is inelastic and total revenue (TR) will decrease.

Q36 answer

37. The price of good X is decreased from $44 to $36. As a result, the total revenue received (TR) by the producers of good X increases from $220 to $396. What is the absolute value of the price elasticity of demand for good X between $44 and $36? (You should round off your answer to the nearest hundredth [2 decimal places], if necessary)

Q37 answer

38. Recently, the Arab oil countries announced that they were planning on decreasing the quantity of oil sold by 4%. This would succeed in increasing their total revenue (TR) if

demand for oil were elastic and the resulting percentage increase in price would be greater than 4%.
demand for oil were elastic and the resulting percentage increase in price would be less than 4%.
demand for oil were inelastic and the resulting percentage increase in price would be greater than 4%.
demand for oil were inelastic and the resulting percentage increase in price would be less than 4%.
demand for oil were elastic and the resulting percentage decrease in price would be greater than 4%.
demand for oil were inelastic and the resulting percentage decrease in price would be less than 4%.

Q38 answer

39. Recent studies have confirmed that the demand for electricity is inelastic. If the price of electricity increases, then

total $ spent by consumers on electricity will increase and the percentage increase in quantity demanded will be greater than the percentage increase in price.
total $ spent by consumers on electricity will increase and the percentage increase in quantity demanded will be less than the percentage increase in price.
total $ spent by consumers on electricity will increase and the percentage decrease in quantity demanded will be greater than the percentage increase in price.
total $ spent by consumers on electricity will increase and the percentage decrease in quantity demanded will be less than the percentage increase in price.
total $ spent by consumers on electricity will decrease and the percentage decrease in quantity demanded will be greater than the percentage increase in price.
total $ spent by consumers on electricity will decrease and the percentage decrease in quantity demanded will be less than the percentage increase in price.

Q39 answer

40. A firm is selling its product at $15 per unit. It estimates that if it were to increase its price to $25 per unit, its quantity demanded would be exactly cut in half. The firm can conclude that from $15 to $25

demand is elastic and total revenue (TR) will increase.
demand is elastic and total revenue (TR) will decrease.
demand is inelastic and total revenue (TR) will increase.
demand is inelastic and total revenue (TR) will decrease.
total revenue (TR) will increase, but insufficient information is provided to determine if demand is elastic or inelastic from $15 to $25.
total revenue (TR) will decrease, but insufficient information is provided to determine if demand is elastic or inelastic from $15 to $25.

Q40 answer

41. A firm is selling 6 units of its product per day at $20 per unit. It decides to increase the price to $35 per unit. If the slope of its demand curve is –5 and is constant, then, from $20 to $35,

demand is elastic and total revenue (TR) will decrease.
demand is elastic and total revenue (TR) will increase.
demand is of unitary elasticity (=1) and total revenue (TR) will remain constant.
demand is of unitary elasticity (=1) and total revenue (TR) will increase.
demand is inelastic and total revenue (TR) will decrease.
demand is inelastic and total revenue (TR) will increase.

Q41 answer

42. The absolute value of the price elasticity of demand between the 2 points, A and B on a demand curve is (using the midpoints formula and rounding off to 2 decimal places, if necessary)

Point	Price	Quantity
A	$22	10
B	$ 18	30

Q42 answer

43. Assume the demand for good X is elastic. The price is changed and, as a result, total revenue (TR) increases. It can be concluded that the price was

increased and the % decrease in quantity demanded is greater than the % increase in price.
increased and the % decrease in quantity demanded is less than the % increase in price.
decreased and the % increase in quantity demanded is greater than the % decrease in price.
decreased and the % increase in quantity demanded is less than the % decrease in price.
increased and the % increase in quantity demanded is less than the % increase in price.
decreased and the % decrease in quantity demanded is greater than the % decrease in price.

Q43 answer

44. The demand curve for good X is linear with a constant slope of -3. At a price of $630 per unit, quantity demanded is 15 units per day. The firm decreases the price to $570 per unit. What is the absolute value of the price elasticity of demand for good X between $630 and $570? ? (You should round off your answer to the nearest hundredth [2 decimal places], if necessary)

Q44 answer

45. Assume the absolute value of the price elasticity of demand for good X is less than 1. The price is changed and, as a result, total revenue (TR) increases. It can be concluded that the price was

increased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price.
increased and the percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price.
increased and the percentage (%) increase in quantity demanded is less than the percentage (%) increase in price.
decreased and the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
decreased and the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
decreased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) decrease in price.

Q45 answer

46. Which one of the following combinations of characteristics would tend to make the demand for good X very inelastic?

Good X is a necessity and there are no close substitutes for good X.
Good X is a necessity and there are many close substitutes for good X.
Good X is a luxury good and there are no close substitutes for good X.
Good X is a luxury good and there are many close substitutes for good X.

Q46 answer

47. If a firm increases the price of its product by 8% and discovers that its total revenue (TR) decreases as a result, then it can conclude that

quantity demanded decreased by less than 8% and thus demand is elastic.
quantity demanded decreased by more than 8% and thus demand is elastic.
quantity demanded increased by less than 8% and thus demand is inelastic.
quantity demanded decreased by less than 8% and thus demand is inelastic.
quantity demanded decreased by more than 8% and thus demand is inelastic.
quantity demanded increased by more than 8% and thus demand is elastic.

Q47 answer

48. The demand curve for good X is linear with a slope of -4. At a price of $12 per unit quantity demanded is 10 units per day. The firm decides to increase the price to $24 per unit. From $12 to $24,

demand is elastic and total revenue (TR) will decrease.
demand is elastic and total revenue (TR) will increase.
demand is of unitary elasticity (=1) and total revenue (TR) will remain constant.
demand is of unitary elasticity (=1) and total revenue (TR) will decrease.
demand is inelastic and total revenue (TR) will decrease.
demand is inelastic and total revenue (TR) will increase.

Q48 answer

49. A firm decreases the price of its product by 10% and notices that as a result quantity demanded increases by 6%. It can be concluded that

total revenue (TR) will increase and demand is elastic.
total revenue (TR) will increase and demand is inelastic.
total revenue (TR) will decrease and demand is elastic.
total revenue (TR) will decrease and demand is inelastic.

Q49 answer

50. Assume the demand for good X is elastic. The price is changed and, as a result, total revenue (TR) increases. It can be concluded that the price was

increased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price.
increased and the percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price.
increased and the percentage (%) increase in quantity demanded is less than the percentage (%) increase in price.
decreased and the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
decreased and the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
decreased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) decrease in price.

Q50 answer

51. If a firm decreases the price of its product by 15% and discovers its total revenue (TR) increases as a result, then it can conclude that (within this price range)

quantity demanded increased by less than 15% and thus demand is elastic.
quantity demanded increased by more than 15% and thus demand is elastic.
quantity demanded increased by less than 15% and thus demand is inelastic.
quantity demanded increased by more than 15% and thus demand is inelastic.
quantity demanded decreased by more than 15% and thus demand is elastic.
quantity demanded decreased by less than 15% and thus demand is inelastic.

Q51 answer

52. A firm can sell 100 units of quantity per day at a price of $5/unit. If it increased its price to $7/unit it would only be able to sell 80 units of quantity per day. By increasing its price from $5 to $7, the firm realizes that, within this price range,

total revenue (TR) would increase and demand is elastic.
total revenue (TR) would decrease and demand is elastic.
total revenue (TR) would stay constant and demand is of unitary elasticity.
total revenue (TR) would increase and demand is inelastic.
total revenue (TR) would decrease and demand is inelastic.

Q52 answer

53. A firm is selling good X at a price of $100 per unit. It estimates that if it were to cut its price in half to $50 per unit, its quantity sold per day would exactly double. What is the absolute value of the price elasticity of demand between $100 and $50 per unit (rounded off to the nearest hundredth [2 decimal places], if necessary)?

0.50
1.00
2.00
Insufficient information provided to calculate the price elasticity of demand between $100 and $50 per unit.
Sufficient information provided, but none of the numerical answers provided is correct.

Q53 answer

54. If the price of a good were raised by 20% and demand is inelastic, it can be concluded that

total revenue (TR) will increase because the decrease in quantity demanded will be greater than 20%.
total revenue (TR) will increase because the decrease in quantity demanded will be less than 20%.
total revenue (TR) will increase because quantity demanded will increase by more than 20%.
total revenue (TR) will decrease because the decrease in quantity demanded will be greater than 20%.
total revenue (TR) will decrease because the decrease in quantity demanded will be less than 20%.
total revenue (TR) will decrease because quantity demanded will increase by less than 20%.

Q54 answer

55. Good X is a necessity which represents a very small % of the average consumer’s budget. There are no close substitutes for good X. If the price of good X were increased by 50%, then the producers of good X can expect that

quantity demanded would decrease by more than 50% because demand is inelastic.
quantity demanded would decrease by more than 50% because demand is elastic.
quantity demanded would decrease by less than 50% because demand is inelastic.
quantity demanded would decrease by less than 50% because demand is elastic.
quantity demanded would increase by less than 50% because demand is inelastic.
quantity demanded would increase by more than 50% because demand is elastic.

Q55 answer

56. A firm increases the price of its product by 25% and notices that as a result quantity demanded decreases by 40%. It can be concluded that

total revenue (TR) will increase and demand is inelastic.
total revenue (TR) will increase and demand is elastic.
total revenue (TR) will decrease and demand is inelastic.
total revenue (TR) will decrease and demand is elastic.

Q56 answer

57. A firm is selling its product at $12 per unit. It estimates that if it were to cut its price to $8 per unit, its quantity demanded would exactly triple. What is the absolute value of the price elasticity of demand between $12 and $8?

2.00
2.50
3.00
5.00
Insufficient information provided to calculate the price elasticity of demand between $12 and $8.
Sufficient information provided, but none of the numerical answers provided is correct.

Q57 answer

58. Assume the demand for a product is inelastic. If the price of the product is increased by 10%, then

total revenue (TR) will increase and the decrease in quantity demanded will be greater than 10%.
total revenue (TR) will increase and the decrease in quantity demanded will be less than 10%.
total revenue (TR) will decrease and the decrease in quantity demanded will be greater than 10%.
total revenue (TR) will decrease and the decrease in quantity demanded will be less than 10%.
total revenue (TR) will increase and the increase in quantity demanded will be greater than 10%.
total revenue (TR) will increase and the increase in quantity demanded will be less than 10%.

Q58 answer

59. The absolute value of the price elasticity of demand between the 2 points, A and B, on a demand curve is (You should round off your answer to the nearest hundredth [2 decimal places], if necessary.)

Point	Price	Quantity
A	$ 33	42
B	$ 17	58

Q59 answer

60. The absolute value of the price elasticity of demand between the 2 points, A and B on a demand curve is (You may round off your answer to the nearest hundredth [2 decimal places], if necessary.)

Point	Price	Quantity
A	$ 5	10
B	$ 3	70

Q60 answer

61. If consumers spend less money ($) per day on good X after the price of good X is decreased by 30%, then (within this price range) it is reasonable to assume that the

demand curve for good x is positively sloped.
percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price and thus demand is elastic.
percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price and thus demand is inelastic.
percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price and thus demand is elastic.
percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price and thus demand is inelastic.

Q61 answer

62. Good X represents a small share of most consumers’ budgets and there are no close substitutes available for it. If the price of good X were increased by 40%, then the producers of good X can expect that

total revenue (TR) would decrease because quantity demanded would decrease by more than 40%.
total revenue (TR) would increase because quantity demanded would decrease by more than 40%.
total revenue (TR) would decrease because quantity demanded would decrease by less than 40%.
total revenue (TR) would increase because quantity demanded would decrease by less than 40%.
total revenue (TR) would decrease because quantity demanded would increase by less than 40%.
total revenue (TR) would increase because quantity demanded would increase by more than 40%.

Q62 answer

63. Assume the demand for good X is elastic. The price is changed and, as a result, total revenue (TR) decreases. It can be concluded that the price was

increased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) increase in price.
increased and the percentage (%) decrease in quantity demanded is less than the percentage (%) increase in price.
increased and the percentage (%) increase in quantity demanded is less than the percentage (%) increase in price.
decreased and the percentage (%) increase in quantity demanded is greater than the percentage (%) decrease in price.
decreased and the percentage (%) increase in quantity demanded is less than the percentage (%) decrease in price.
decreased and the percentage (%) decrease in quantity demanded is greater than the percentage (%) decrease in price.

Q63 answer

64. The price of good X is decreased from $12 to $8. As a result, the total revenue received (TR) by the producers of good X increases from $36 to $136. What is the absolute value of the price elasticity of demand for good X between $12 and $8? (You may round off your answer to the nearest hundredth [2 decimal places], if necessary)

Q64 answer

65. A business firm is selling its product at a price of $25 per unit and it is receiving total revenue (TR) of $550 per day. The firm estimates that the price elasticity of demand between $25 and $50 is unitary (=1). How many units of quantity per day would the firm expect to sell at a price of $50 per unit?

Q65 answer

66. A firm decreases the price of its product by 25% and notices that as a result quantity demanded increases by 14%. It can be concluded that

total revenue (TR) will increase and demand is inelastic.
total revenue (TR) will increase and demand is elastic.
total revenue (TR) will decrease and demand is inelastic.
total revenue (TR) will decrease and demand is elastic.

Q66 answer

Formulas

DY/DX = slope. Y is the variable measured on the vertical axis. X is the variable measured on the horizontal axis.

For supply and demand curves, price (measured in $ per unit) is measured on the Y axis and quantity (measured in units per time) is measured on the X axis. Therefore, DP/DQ = slope.

Price Elasticity of Demand = (%DQ/%DP) = [(DQ/Average Q) / (DP/Average P)]

If price elasticity is greater than 1, then demand is elastic.

If price elasticity is equal to 1, then demand is of unitary elasticity.

If price elasticity is less than 1, then demand is inelastic.

Total Revenue (TR) = Price (P) x Quantity (Q)

If demand is elastic (elasticity >1), P & TR vary in opposite directions because the %DQ > %DP.

If demand is of unitary elasticity (elasticity =1), P & TR are independent of each other (TR doesn't change as P changes) because the %DQ = %DP.

If demand is inelastic (elasticity <1), P & TR vary in the same direction because the %DQ < %DP.

Answers

1. e Return to Q1
Solution to Q1

2. d Return to Q2
Solution to Q2

3. d Return to Q3
Solution to Q3